Nonprofits

The Entrepreneurial Union

When the Internet company that Karen Kelly
worked for was sold and her job disappeared, she set
out to become a freelance writer in New York City.
Married to a musician and raising a young son, she
struggled to find affordable health care.

Across the country in Pasadena, Calif., Colleen
Nelson had a different problem. As a media consultant,
she had steady work with MGM Film Studios.
But, working from home, she felt isolated.

Both women eventually found their way to the
Freelancers Union, a Brooklyn, N.Y.-based nonprofit
that provides self-employed workers with health insurance,
retirement plans, community events, and
political representation. Unlike most employee benefits in the United States, which are tied to particular
companies, the Freelancers Union’s offerings can
travel with independent workers from job to job and
from project to project.

Through the Freelancers Union, Kelly purchased
health insurance for herself and her family. She also
met an accountant at a tax workshop, and improved her Web site
“2,000 percent” after attending a union-sponsored Web design seminar,
she says. Meanwhile, Nelson began collaborating with likeminded
union members in Los Angeles. “The Freelancers Union
provides a sense of stability knowing that there is a place to go to
get help, contacts, ideas, and other resources,” says Nelson. “It’s
daunting working on your own.”

Today, 26 percent of U.S. workers are self-employed as Web designers,
software developers, financial advisors, artists, writers, musicians,
and consultants—to name a few occupations. This number
is up from 19 percent in 2006, reports Kelly Services Inc., a Troy,
Mich.-based staffing service. The rise of the free agent economy is
allowing more and more people to be their own bosses, liberating
them from the confines of a traditional offi ce. It also allows companies
to cut costs to meet changing market demands.

With the freedom and flexibility of self-employment, however,
come the trade-off s of stability and job security. Freelance paychecks
can be erratic. Freelance contractors must pay out of pocket
for their own health insurance and retirement plans, and they rarely
qualify for unemployment.
To meet the needs of the growing freelance workforce, Sara
Horowitz created the precursor to the Freelancers Union, called
Working Today, in 1995. (The organization still conducts research
and policy analysis.) In 2001, she launched the first version of a new
union, the Portable Benefits Network, which was renamed the
Freelancers Union in 2003. The Freelancers Union is not just another
labor organization. Instead, it updates classic trade unionism
with the modern impulses of social entrepreneurship, supporting
itself largely with fees for services. At the same time, the Freelancers
Union reveals its trade union spirit by working through political
channels to secure better conditions for independent workers.

By making the right innovations at the right time, the organization
now has some 115,000 members from all 50 states. And in
the last 18 months alone, its membership has grown by 86 percent.
For her efforts to create a new social safety net, Horowitz
won a MacArthur Foundation “Genius” Fellowship in 1999.

“The Freelancers Union is writing new rules for the new workforce,”
says Cheryl Dorsey, president of Echoing Green, a nonprofit that supports social entrepreneurs, including
Horowitz and her organization. “Sara’s
great insight was to recognize that the social
safety net that followed Franklin D.
Roosevelt’s New Deal no longer meets the
needs of the freelance workforce.”

Union Business

Horowitz comes from a long line of labor
organizers. Her grandfather was vice president
of the International Ladies Garment
Workers Union in New York, and her father
was a union lawyer. “I came to social entrepreneurship accidentally,”
she says. “I grew up in a completely lefty family where
being an entrepreneur was a dirty word.”

As a union organizer and union-side lawyer, Horowitz spent 1995
at Harvard University’s John F. Kennedy School of Government, rethinking
her own assumptions while earning a master’s degree in
public policy. She came to believe that existing labor laws and regulations
didn’t fit the freelance economy. The old union model that
offered standardized packages did not meet the individual needs of
such a diverse group of workers.

“I kept thinking if you want to build the next union movement,
what will be the killer app that will get it moving?” Horowitz explains.
“The No. 1 issue was health insurance.”

To provide access to health care as well as dental, disability, and
life insurance, the Freelancers Union uses the bulk purchasing power
of its many members, which opens doors and drives down premiums.
Discounts are available nationwide for such health-related
needs as vision care and dental care. The union also provides otherwise
unobtainable access to disability insurance.

In the state of New York, the Freelancers Union even set up its
own insurance company last January, drawing on $17 million of
grants and loans from a coalition of businesses and philanthropies.
Individual costs for insurance range from $140 to $350 per
month, depending on the size of the deductible. In comparison,
average monthly premiums for other self-insured New Yorkers
are in the $800-$1,000 range.

The organization also unveiled a nationwide 401(k) retirement
plan for its members in April 2009. Milliman Inc. serves as the plan
administrator; Charles Schwab Trust Company serves as the trustee.
Members enrolled in the plan can elect to invest in 12 professionally
vetted and monitored funds or target-date funds. To promote
regular savings, the plan also offers automatic withdrawals
from freelancers’ checking accounts. There is no minimum investment,
and the monthly $11 fee will go down as more members join.
Further, union members can adjust their contributions for free to
accommodate the feast-or-famine cash flows that independent
workers often experience.

Although the Freelancers Union’s “goals and intent are profoundly
the same” as those of traditional unions, “our business and
organizing models are profoundly different,” says Horowitz. For instance,
unlike most U.S. unions, which support themselves by collecting
membership dues, the business-minded Freelancers Union
earns revenues by charging fees for its many services. The organization
then reinvests all its earnings into new
initiatives, education, and advocacy.

This year, the Freelancers Union expects
that its revenues will exceed $75 million.
The nonprofit has been sustainable
since 2006, meaning that its revenue-generating
activities cover the costs of its mission-
centered projects. Still, the organization
seeks grants for the start-up costs of
some new initiatives. “We’ve created a hybrid
ecosystem,” Horowitz says.

The Freelance Future

Also unlike traditional unions, the Freelancers Union does not negotiate
salaries or organize strikes. It does, however, work with politicians
to win better protections for free agents. A recent advocacy
triumph for the Freelancers Union came on March 23, 2009, when
New York City Mayor Michael Bloomberg announced that he would
seek a new federal unemployment benefit for freelancers, who
make up 15 percent of New York City’s workforce. The Freelancers
Union designed the proposed Unemployment Protection Fund,
which would require the federal or state governments to match
$300 for every $1,000 a Freelancers Union member voluntarily
pays into a designated fund. Members could draw upon these funds
to pay for college tuition, housing, education, or other needs in case
of unemployment.

“Freelancers lack any safety net to fall back on during hard times,”
Bloomberg said in a speech to the Economic Club of New York. “If
a company lays you off , you can collect unemployment. But if
you’re a freelancer and you lose all your clients, good luck.”

Horowitz’s organization is improving upon old union models by
exploiting the power of the Internet. The Freelancers Union provides
an online portal of benefits and unites individual members
within and across geographies. Through the organization’s Web site,
workers can find copywriters, legal advisors, and babysitters in their
extended community, creating even more opportunities to meet clients
and make money. They can also orchestrate online and offline
meetings. Niche communities within the network unite to discuss
such topics as mental health, insurance premiums, taxation policy,
and résumé writing. The union’s online presence also allows its
members to advocate on their own behalf by signing petitions, organizing
political events, and joining together to meet politicians.

Next up for the Freelancers Union is an online credit union
where freelancers can save money as well as receive loans, says
Horowitz. “We are also going to start really engaging in the policy
debate,” she says. “Washington, D.C., is the city of ‘can’t-do-ism’ but
we have built a ‘can-do’ model and an institution that reflects that
perspective.” In addition, the organization aims to build “real roots”
in five cities, establishing bases of support for members as it has in
New York City.

“Freelancers need a creative organization to help them develop
good benefits, stability of employment, and job security,” says
Lawrence Mishel, president of the Economic Policy Institute, a
think tank based in Washington, D.C. “The Freelancers Union has
had some success, and I would expect to see more.”

Amy Wilkinson is a senior fellow at Harvard University’s Center for Business
and Government and a public policy scholar at the Woodrow Wilson International
Center for Scholars. She is writing a book about new paradigms in leadership.